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Toys “R” Us needs to get Retailing 101 right if it hopes to reverse sales and profit declines, much less resume growth.

So said Antonio Urcelay, who replaced Jerry Storch in October as chairman and CEO of the $12.5 billion retailer during a press event yesterday at the company's Times Square store in New York City.

Urcelay and Hank Mullany, president of Toys “R” Us, U.S., detailed a “diagnosis” and treatment plan for the retailer, which operates over 1,700 stores worldwide, including 872 U.S. units under the Toys “R” Us and Babies “R” Us nameplates.

“In 2013, the business was disappointing, we can’t be proud of our results recently,” Urcelay said.

The Diagnosis

Macro factors have hurt the business, such as 400,000 fewer births in the U.S. since 2007; a toy industry that’s been in a funk due to changes in children’s play patterns; and the rapid growth of online shopping, which has depressed shopper traffic.

Antonio Urcelay, CEO of Toys "R" Us, Inc., and Hank Mullany, president of the U.S. division, detailed the retailer's turnaround plan at the chain's Times Square store.

But many of Toys “R” Us’ wounds are “self-inflicted,” he said.

While shoppers credit the chain for carrying the newest toys and being a category specialist in a way the Amazons and Walmarts of the world can't, “they’re not happy with” its slow checkout process, cluttered and disorganized shopping environment, too-high prices and “told us we’re too often out of stock” Urcelay said. “If we cannot please our customer, there’s really little else we can do.”

Shopper disappointment has extended to its online business, with shortfalls such as outdated apps to less-than-stellar shipping.

Urcelay attributed much of Toys “R” Us’ misfires in recent years to a corporate culture that took its cues from within its own ranks, rather than from its shoppers – but that’s now changing, he said.

The Fix-It Plan

With a turnaround strategy informed by consumer research and input from its vendors, the retailer’s “Tru Transformation” plan revolves around improving the shopping experience and consumers' price perception of the chain (particularly as shoppers can compare prices online and from their smart phones in an instant), implementing inventory management discipline, and right sizing the cost structure of the company, executives said.

The idea is to redefine Toys “R” Us in the eyes of shoppers so that its stores are deemed easy to shop, sales associates are considered experts in the toy and juvenille categories, and prices are fair, said Mullany, who said the U.S. business generates half of Toys “R” Us’ profits worldwide.

To revive the business, the retailer is making sure it’s in stock on the right goods at the right time with a “product life cycle management" process it began implementing, and new “clearance blast” events that move out slow-moving merchandise and bring in fast-moving ones.

Also on tap is regaining pricing credibility by reducing the myriad merchandise exclusions in its price-matching policy, for one, and communicating newly simplified pricing and promotional offers to shoppers via marketing.